2026 (3) TMI 663 - AT - IBC

Right to be heard in sales during moratorium: affected purchasers and creditors may require impleadment to protect substantive rights.

Impleadment arising from a sale of a secured asset during an operative moratorium is addressed by identifying when third parties whose substantive rights ... Seeking to protect rights arising from the sale of a secured asset during an operative moratorium - Right to be heard of persons - moratorium principle - Transaction involving the sale of secured asset by Indian Bank, they both have now come forward with separate applications for impleading. Right to be heard of persons - HELD THAT:- The Court held that when a civil right is in peril of being affected by ongoing proceedings, those whose rights are so imperiled are entitled to be heard. The applicants had sold and acquired an asset of the corporate debtor during a period when a moratorium arising from an earlier insolvency order was in force and asserted that the impugned admission of CIRP could affect their interests. Irrespective of the ultimate merit of their contentions, their substantive rights were exposed to adjudicatory scrutiny and, therefore, the applicants were necessary and proper parties whose participation was required to prevent collateral damage to their rights and to ensure that justice is seen to be done. On that basis the Court exercised its discretion to permit impleader. [Paras 4, 5] Both applications for impleader are allowed; the applicants are directed to be impleaded as respondents 3 and 4 and the appellant is directed to amend the memo of parties and serve the appeal papers on them with specified timelines for filing objections and rejoinder. Final Conclusion: The applications for impleading the applicants were allowed on the ground that their substantive rights were imperilled and they were necessary and proper parties; directions were given for their impleader, amendment of the memo of parties, service of papers and timelines for pleadings. Issues: Whether the applicants seeking to protect rights arising from the sale of a secured asset during an operative moratorium should be impleaded in the pending appeal.Analysis: The applicants assert that a sale of a mortgaged asset occurred while a moratorium arising from an earlier insolvency order was in force and that the subsequent admission of a second CIRP may imperil the purchaser's and bank's rights. Where a civil right is at risk of being affected by ongoing proceedings, persons whose substantive rights may be collateral casualties are entitled to be heard. The need to implead depends on whether the applicants are necessary or proper parties because, in their absence, collateral damage to rights dealt with in the transaction can occur. The court considered that the applicants have a direct interest in the subject-matter (the sold secured asset) and that their participation is necessary to secure justice and to allow them to place before the tribunal contentions regarding the legality of the impugned admission and the potential impact on the sale.Conclusion: The applications for impleadment are allowed; the applicants shall be impleaded as respondents 3 and 4, the appellant shall amend the memo of parties and serve the appeal papers on the newly impleaded parties within three days, and the impleaded respondents may file objections by 27 March 2026 with rejoinder by 10 April 2026.